Yamana Gold (NYSE: AUY) released earnings after the close yesterday and blew the EPS number away. Yamana posted $0.25 per share of clean earnings which was over 6x what the analysts expected at $0.04. In addition to a very good earnings report, news out Tuesday that Yamana had discovered 1.5 million more ounces of proven reserves of gold than they mined in 2008 only increases the outlook for the company’s future.
As copper is very commonly found in the same geological formations as gold and also realizing that Yamana has a few solid copper mines, the revenues the company generates selling copper is a significant part of their top and bottom lines. In 2008 copper got hammered from around $4 a share down to $1.50 a share and as Yamana had the foresight to hedge their forward copper production for 2008 their earnings, not surprisingly, held up very well. The silver lining to the drop in copper prices down to $1.50 during a contracting worldwide GDP period indicates copper does not have much farther to fall. In fact, today the copper ETF - JJC - broke out of its bottom consolidation channel and closed for a second day above its 50 day exponential moving average. This seems to be good news for copper prices going forward and of course also for copper producers such as Yamana.
Yamana closed Wednesday's trading at $7.97 and traded up to $8.40 after the earnings release. Yamana looks golden and now comes the Golden Cross.
The Golden Cross is a technical analysis term referring to the 50 day and 200 day moving averages. A ‘Golden Cross’ occurs when the 50 is below the 200 and crosses through it to the upside. This has been known as a very positive technical signal. Right now the 50 EMA is at $7.85 and the 200 is at $8.91 with the faster moving 50 sloped upwards and closing fast.
This positive earnings news and Yamana’s bounce and uptrend off the lows of this past November, combined with the $0.43 after hours move, could be the event that propels the stock price above the 200 for good as well as bringing the 50 up through the 200 soon to complete the Golden Cross.
Gold itself has been getting hit since its last test of the big round magical number at $1,000 last week and as nothing ever goes straight up I am waiting for this intermediate sell off to bottom out and then resume the overall upward trend of the past 3+ months. Minyanville.com just posted an article where the author believes a massive short position has been built in the GLD over the past 7 days and they expect a strong short squeeze covering rally to ensue withing the coming week. Let’s hope so as this would provide a very nice tail wind for Yamana’s stock.
Golden Yamana earnings and a coming Golden Cross. All that glitters sometimes is gold - but I will take the green of profits as well.
Disclosure: Author is long AUY and GLD calls